Eurozone expected to rebound

THE eurozone's recession likely sharpened at the end of 2012, but the single currency zone will begin to rebound in the second quarter of 2013, forecasters at German, French and Italian agencies say.

Agencies Ifo, INSEE and Istat said in a joint statement on Wednesday that "...business surveys as well as the decline of the industrial production in October suggest a further decrease of activity in" the fourth quarter of 2012 of 0.4 per cent compared with the previous quarter.

The eurozone economy contracted by 0.1 per cent in the third quarter after a 0.2 per cent drop in the second quarter.

The three agencies had forecast a drop of only 0.1 per cent in the fourth quarter of 2012 in their previous forecast in October.

They now expect the eurozone economy to stagnate with zero growth in the first quarter of 2013 followed by a mild recovery of 0.2 per cent in period from April through June.

The agencies expect the eurozone to benefit from an increase in external demand thanks to faster growth in emerging countries and the resolution of a fiscal standoff that should help the US economy to recover.

"The easing of tensions surrounding sovereign debts would support a stabilisation of investment over the forecast horizon," the forecasters said.

The eurozone economy would also be boosted by a "decrease of inflation and the mitigation of fiscal consolidation efforts," they added.